Calculating, with income e¤ects, the compensating variation for a state change’, Environmental and Resource

One can easily obtain exact closed-form solutions for the compensating variation (and equivalent variation) in the presence of income e¤ects when the policy being evaluated can be described as a change in the state of the world and one is willing to assume the policy change does not change the individuals epsilon draw. Alternatively, if one assumes the policy changes the epsilon draw, the expectation of the compensating variation is a complicated integral, typically without a closed-form. The assumption that the policy does not a¤ect ones epsilon draw is common, and often reasonable, but little discussed